South Africa payroll and benefits guide
What global businesses need to know about payroll in South Africa
There’s lots to love for foreign businesses looking at expanding into South Africa. It’s Africa’s largest economy, and its sources of income are very mixed, from technologically advanced services to heavy industries like mining, carmaking and machinery. South Africa also has the advantages of an English-speaking population (at least in the larger cities), and no reliance on exports to a single nation.
Compared to Western standards, wages are low and unemployment is high, meaning that many incoming businesses are able to access the skills and workforce they need quickly. However, it’s because of the ongoing unemployment issue that the South African authorities are actively exploring limits on foreign labor. This is one of the key developments that you can explore in this guide to running payroll in South Africa.
Getting Started
South Africa has relatively few restrictions on foreign businesses opening companies or branches. However, before starting the process, it’s important to check the status of the tax treaty (if there is one) between South Africa and the company’s original country, to ensure that profits made in South Africa don’t end up being taxed twice.
The most common type of business formed is a proprietary limited company, which has no restrictions on shareholders and can be entirely foreign-owned despite being a separate legal entity. There’s also the advantage that only one registered director is required, and there is no minimum capital requirement.
The South African government’s Companies and Intellectual Property Commission (CIPC) has an online ‘BizPortal’, on which it’s possible to complete most of the main business setup processes. This includes director verification, company name registration, tax and social insurance registration, and even setting up a business bank account. Depending on the nature and complexity of your business, this can be completed in as little as one day, and for as little as ZAR 175 (approx. £7.50; $10.00; €8.50).
Opening an in-country bank account is a legal requirement, but it does not necessarily have to be used for making payments.
Employment Considerations in South Africa
All employees must be registered with the Department of Employment and Labor. South African labor legislation ensures employees (including foreign nationals) are treated fairly by their employers; it details policies on compensation as well as employees’ rights, working conditions, health and safety, discrimination, unemployment, and termination.
In May 2025, the South African government approved its National Labor Migration Policy whitepaper, which means that major changes to rules around foreign labor are likely to be passed by their Parliament in the near future. This could include quotas on foreign labor in industries including hospitality, agriculture, tourism and construction; exemptions to quotas when there is a shortage of certain skills; and restrictions on business visas and foreign-owned small businesses in some industries. You should keep a close eye on developments in the months and years ahead, as this legislation could have a major impact on how your South African expansion operates.
The maximum working week in South Africa is 45 hours a week. The daily maximum is nine hours for those who work five-day weeks. For those working six-day weeks, the daily maximum is eight hours, as well as the 45-hour weekly limit.
Overtime can only be worked with the agreement of the employee, is limited to three hours a day or ten hours a week, and is paid with a 50% premium. Work on public holidays and Sundays similarly requires employee consent and is paid with a 100% premium. However, there is a cut-off in place: anyone who earns more than ZAR 261,748 a year (approximately £11,000; $14,900; €12,700) is not entitled to any overtime pay at all. With mutual agreement, time off in lieu can be granted in exchange for overtime pay.
Notice periods are one week for employees with less than six months’ service, two weeks for employees with between six and 12 months’ service, and four weeks for those who have been with the company for a year or longer. The standard probation period in South Africa is three months, but can be extended if it’s felt appropriate. However, if an employer doesn’t want to keep an employee on post-probation, they are required to provide guidance, training and performance management before termination.
Compensation and Severance
South Africa only introduced a national minimum wage for the first time in 2019, but it has been substantially increased every year since. At the time of writing, the last increase took effect on March 1 2025, and took the rate up to ZAR 28.79 per hour (approx. £1.20; $1.65; €1.40), which is over 40% more than the initial 2019 rate. Employees must be paid within seven days of the end of a particular period of earning.
However, it should be noted that many workers in South Africa earn substantially more than this. As of the first quarter of 2025, the average monthly salary was ZAR 28,289 (approximately £1,190; $1,610; €1,380).
The payment of employee bonuses in South Africa is entirely discretionary, and are taxed in the same way as regular income.
Employees are entitled to severance pay if their employment is terminated for operational reasons (i.e. redundancy), at a rate of one week’s salary per year of service.
Tax & Withholding Considerations
Employers in South Africa have monthly withholding obligations for income tax and social security. The South African tax year runs from 1 March to 28 February (29 February on leap years).
The income tax system and thresholds in South Africa have remained stable over the last few years. As of the 2025/26 tax year, there are seven progressively higher bands in place. The lowest of 18% applies to the first ZAR 237,100 of annual income (approx. £10,000; $13,500; €11,600). The highest of 45% applies to earnings above ZAR 1,817,000 per year (approx. £76,400; $103,500; €88,600).
Foreign nationals are taxed on work provided or services rendered in South Africa, although tax treaties with other countries may provide certain levels of tax relief.
Social security contributions in South Africa are relatively small. Employers and employees each contribute 1% of earnings for unemployment insurance, while employers also contribute 1% for the Skills Development Levy. Perhaps the largest contribution employers have to make is to the Workers Compensation Fund, which varies significantly depending on employment type, employee earnings, and the level of risk involved. Foreign nationals are exempt from UIF contributions.
Employee contributions in other areas such as healthcare are not compulsory. South Africa runs an insurance-based system for private healthcare, and while public healthcare requires up-front payment, it is partly subsidized.
Holiday and Leave Considerations
Employees in South Africa get three weeks off each year, accrued at a rate of 1.25 days per month, but this is taken in a single block. Any further paid leave entitlement is at employer’s discretion. Employees should also get paid time off on the 12 days of public holidays each year. If a public holiday falls on a Sunday, then the day off is normally moved to the Monday.
Paid sick leave entitlement is six weeks, meaning 30 days per year for those working five-day weeks, and 36 days per year for those working six-day weeks. This is paid at full salary by employers. Sick leave entitlement runs on a three-year cycle: after each three years of employment, a new allocation takes effect and any unused sick days are lost.
Maternity leave entitlement is four months, which can start any time within the last four weeks before birth, and cannot end until at least six weeks post-birth. Officially, this is unpaid, however some employers voluntarily offer maternity pay as an employee benefit. Additionally, employees who have been making unemployment insurance contributions can receive social security payments of 60% of salary, for the duration of the maternity leave.
There is no specific entitlement to paternity leave, but non-birthing parents are entitled to parental leave, which is ten calendar days unpaid after children are born. Again, those making unemployment insurance payments can claim benefits here, of up to 66% of their salary.
If an employee is injured at work, then employers must cover 75% of their regular salary from the fifth day of absence to the end of the third month, although employers can be reimbursed for this through the Workers Compensation Fund. The fund picks up the tab for absences longer than three months.
There is also an entitlement to Family Responsibility Leave, which is three paid days per year, in the event of the birth of a child, illness of a child, or a death in the immediate family.
Payroll in South Africa: A summary
South Africa is full of potential for foreign investment for a host of reasons. But the prospective changes to foreign labor legislation may substantially change the landscape, while regular revisions to the minimum wage rate means payroll teams need to pay constant attention to developments. Keeping track of all this, as well as changes in other countries, can be complex and time-consuming – but it’s something that a global payroll partner with country-specific expertise can take care of on your behalf.
This article is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional. Click here to see more country payroll guides from CloudPay.